Bears return as digital markets routed

Market volatility, one of the main barriers for institutional trading, clearly remains a problem

ByLuke Thompson

After several weeks of bullish momentum and solid gains, digital asset markets have plummeted again, shedding almost US$17 billion in less than one day of trading. Many technical analysts had been warning a market correction was due, and it seems to have arrived.

Cryptocurrency markets plunged in one massive movement late on Sunday as a huge selloff began, and the bears continued to pressurize markets. The total one-day loss was almost 12%.

Volatility has been one of the drawbacks for institutional involvement in the nascent digital asset space. A number of high profile investment products are in a holding pattern awaiting a response from the slow-moving US Securities and Exchange Commission. These products are designed to protect institutional investors from the massive bouts of volatility that still shake cryptocurrency markets.

The rout on Sunday began when Bitcoin, the traditional “pied piper” for market sentiment, hit a large barrier of resistance at $4,200 following steady gains all month. In one swift hour-long price movement Bitcoin lost almost $400 to plunge to $3,800 and in doing so pulled the entire market down.

One of the drivers of recent market momentum has been the growth of the decentralized application platforms Ethereum and EOS, the second and fourth largest cryptocurrencies respectively. So far this month digital currency markets have surged by 20% as billions poured into the embryonic asset class. The year-long “crypto winter” finally seemed to be melting and optimists were talking up the chance of another bull run that might replicate the fervor of late 2017.

Instead, Bitcoin lost 8.5% on Sunday night, but this was nothing compared to the damage done to some of the other crypto assets. Ethereum had been hammered down 15% when the digital dust settled Monday morning in Asia. Its price had slumped from $165 to $140 and hopes of further gains before this week’s network upgrade and hard fork seem to have been quashed.

Rival crypto platform EOS also lost 15% and Ripple’s XRP token took a 10% hit on the day. The entire crypto market, aside from a couple of obscure altcoins, was a sea of red in what has been the biggest single-day crash of the year so far.

What is clear now is that the bears still have their paws on the digital markets. It is also apparent that fast-moving volatility will remain an issue for some time and cryptocurrency investors need more protection from these seemingly irrational price swings.